Diabetic Medical Equipment Companies to Pay More Than $12 Million to Resolve False Claims Act Allegations

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U.S. Healthcare Supply LLC and Oxford Diabetic Supply Inc. and the two owners and presidents of those companies have agreed to pay the United States more than $12.2 million to resolve allegations that they violated the federal False Claims Act by using a fictitious entity to make unsolicited telephone calls to Medicare beneficiaries in order to sell them durable medical equipment, the U.S. Department of Justice announced. U.S. Healthcare Supply LLC, based in Milford, New Jersey, has agreed to pay more than $5 million, and Jon P. Letko, its owner and president, has agreed to pay more than $1 million. His brother, Edward J. Letko, the owner and president of Oxford Diabetic Supply Inc., a medical equipment supplier that allegedly also participated in the scheme, has agreed to pay $6 million plus interest.

“We will continue to hold health care providers accountable for attempting to circumvent Medicare statutes and regulations that help prevent the submission of claims for medically unnecessary services and supplies,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “Arrangements which clearly disregard program requirements in order to enhance the financial interests of health care providers will not be tolerated.”

“Cold-calling people to sell them expensive medical equipment is prohibited for a reason: unsuspecting patients shouldn’t be coerced into making medical decisions about devices and equipment – which they may not even need – on the basis of a sales pitch,” said U.S. Attorney Paul J. Fishman for the District of New Jersey.

The settlement announced today resolves allegations that U.S. Healthcare Supply LLC and Oxford Diabetic Supply Inc. set up and controlled an entity called Diabetic Experts Inc., which they used to make unsolicited telephone calls to Medicare beneficiaries in order to sell them durable medical equipment. The companies submitted claims to Medicare for the equipment that they sold based on these unsolicited calls. This conduct violated the Medicare Anti-Solicitation Statute.

“Medical decisions should be made solely by a patient and a doctor,” said U.S. Attorney Paul J. Fishman of the District of New Jersey. “They should not be influenced by a company cold-calling a Medicare patient to sell equipment that the patient might not even need.”

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $30.5 billion through False Claims Act cases, with more than $18.4 billion of that amount recovered in cases involving fraud against federal health care programs.

This case was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the District of New Jersey and the U.S. Department of Health and Human Services’ Office of the Inspector General. The claims resolved by the settlement are allegations only and there has been no determination of liability.